TV broadcasters set an $86B price tag for 126 megahertz of spectrum in the 600 MHz band during the first stage of the reverse auction process
Television broadcasters set a high bar in terms of what they want for their 600 MHz spectrum licenses the Federal Communication Commission wants to in turn auction off to the commercial mobile telecommunications space.
At the close of the reverse auction connected with the ongoing 600 MHz incentive auction process, television broadcasters set a clearing price of more than $86 billion for the 126 megahertz of spectrum the FCC is looking to repackage into 100 megahertz of spectrum for the forward auction part of the proceedings. The amount followed 52 rounds of bidding, which began with initial proceedings on March 29, followed by the beginning of clock phase bidding on May 31.
“Broadcasters have done our part; now it’s up to the wireless industry to demonstrate the demand is there for low-band TV spectrum,” said Dennis Wharton, EVP of communication for the National Association of Broadcasters, in a curt statement.
Analyst and industry observers, many of whom were expecting a potentially high number from the reverse auction, were still surprised by the amount. However, most seemed to indicate the amount would likely force the FCC to conduct a second stage of the reverse auction later this year in order to bring down the clearing price, potentially lowering the total amount of spectrum available and also pushing the auction proceedings into next year.
“At a clearing cost of more than $86 billion, the bar had been set high for the wireless industry,” noted Dan Hays, principal at PwC’s Strategy& division. “Given the current financial profile of the industry, this number may have to move significantly lower. A second stage of the reverse auction later this year is likely. Indeed, we could well see the proceedings drag on into early 2017 before coming to a final conclusion.”
Berge Ayvazian, senior analyst and consultant at Wireless 20/20, who had been one of the more bullish analysts in terms of how much money the 600 MHz auction might generate, said the current clearing price would require bidders outside the traditional telecom space for overall auction proceeds to come close to the target.
“The FCC will need to attract big bucks and several new bidders if the 600 MHz forward auction is going to be completed before the end of 2016,” Ayvazian noted. “Carrier war chests have been stretched in recent years and together AT&T, T-Mobile and Verizon may bid as much as $30 billion. So it may be up to newcomers such as Comcast to reach the clearing cost of more than $86 billion, and a second stage of the reverse auction may be needed later this year.”
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